McKinsey Identifies S. Oregon Good for IT Onshoring

25082010

A recent study by McKinsey identifies US based areas that are good for locating corporate IT services and server farms. Southern Oregon, particularly the Rogue Valley, is one of them.

The report states, “An increasing number of organizations with large IT infrastructures are now taking a close look at second-tier cities in close-shore locales in the United States as venues for future investments. Pools of high-level IT talent are available in such regions, wage levels are attractive, and generous government incentives are often available to spur local investment.”

In fact, the study identifies the Rogue Valley as one of the most attractive areas as it has a broad array of software and IT professionals but with wage levels in the bottom third of the national average. See map below.

Beyond lower wages, regions outside of the main metropolitan centers offer skilled engineers in specialized areas where demand is high, such as infrastructure management or application development and maintenance for new and legacy IT systems. Regional universities and community colleges have markedly expanded their IT curricula in these very areas, and many universities are forging partnerships with employers to guarantee supplies of talent for future needs. Federal, state, and local authorities, eager to reduce regional pockets of unemployment by attracting skilled jobs and IT investments, are offering incentives such as training grants, tax abatements, and subsidized loans.

Adding impetus to the broader close-shore investment trend is the fact that some organizations find themselves under pressure to diversify their portfolios of global IT service facilities. Many companies are heavily weighted in just one or two offshore regions, which exposes those companies to inflationary pressures, currency volatility, and operational risks. In 2008, for example, India’s inflation rate rose to 11 percent, while the rupee’s value against the euro and the dollar fluctuated by 20 to 30 percent.

Finally, for a small subset of skills—ranging from legacy to very high-end ones (such as subject matter expertise and senior-level system administration jobs)—companies are opting to develop and retain the work in low-cost close-shore locations. This development is driven by the ability to procure and develop these scarcer skills in locations where a regular supply of them is available, and at a cost-competitive price relative to offshore locations.